Strategists will be monitoring results for evidence that ‘consumer euphoria’ expired with Christmas 2022, and that an economic cliff could be approaching for borrowers.
Corporate trading updates spilling into the beginning of 2023 will take on outsized importance this reporting season as investors brace for early signals that consumer demand is deteriorating in the face of rising interest rates.revealed a strong Christmas trading period, suggesting that expectations of a sharp economic slowdown were potentially overblown, broker UBS said.
“We have identified that consumer euphoria is now behind us, and that a cliff could be approaching, signs of which will be keenly monitored in the post new year trading updates companies provide,” said UBS equity strategist Richard Schellbach.UBS acknowledged that the global economic outlook for 2023 has become “less bad” following China’s reopening and milder European weather, and near-term earnings risks for domestically exposed stocks have somewhat receded.
The broker also noted that dis-inflationary forces during the reporting period will support corporate profit margins, allowing them to rebuild throughout this year. Macquarie sees scope for another round of earnings upgrade for the banks, flagging that Commonwealth Bank could surprise when it releases its half-year results on February 15.
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